As mortgage rates hold steady, Dana Anderson of Redfin reports that there has been an increase in new listings and home tours. Mortgage-purchase applications are up 3% from a month ago, and Redfin’s Homebuyer Demand Index is up 5%. Further, pending U.S. home sales have posted their smallest year-over-year decline in two years (-3%), with 9% more new listings than a year ago.

Source: Redfin (January 2024)

The Mortgage Bankers Association (MBA) reports that mortgage demand has picked up in the new year, with applications increasing almost 10% week-over-week. Joel Kan, MBA’s Vice President and Deputy Chief Economist, comments:

“The increase in purchase and refinance applications for both conventional and government loans is promising to start the year but was likely due to some catch-up in activity after the holiday season and year-end rate declines…Mortgage rates and applications have been volatile in recent weeks and overall activity remains low.”

Omar Mohammed of Newsweek comments on the increase in activity, highlighting that mortgage applications have increased, with first-time homebuyers and repeat buyers boosting the market. Buyers are optimistic about acquiring a home, as they expect rates for home loans to fall this year.

Optimism among buyers is on the rise, according to Fannie Mae’s Home Purchase Sentiment Index (HPSI), which rose in December due to expectations among consumers that mortgage rates would drop throughout 2024. Mark Palim, Vice President and Deputy Chief Economist at Fannie Mae comments: 

“This significant shift in consumer expectations comes on the heels of the recent bond market rally and an already-significant downtick in 30-year mortgage rates, from their high of nearly 8% in early November to 6.62% as of this past week. Notably, homeowners and higher-income groups reported greater rate optimism than renters; in fact, for the first time in our National Housing Survey’s history, more homeowners, on net, believe mortgage rates will go down than go up.”

Mike Simonsen of HousingWire projects that 2024 will see 15% growth in home sales over 2023. Supporting this assessment is that home sales are increasing each week, sales inventory is also rising, and home price signals are jumping.

New inflation data

Fannie Mae reports on the new inflation data from December, highlighting that the Consumer Price Index (CPI) rose by 0.3% in December, up 3.4% from last year. Energy and food prices increased by 0.4% and 0.2% respectively. The highlight is that core inflation has remained high due to shelter costs, medical care services, and an unexpected surge in used car and truck prices.

Source: Fannie Mae (January 2024)

Jeff Cox of CNBC reports on the slight rise in inflation, highlighting that “much of the increase came due to rising shelter costs. The category rose 0.5% for the month, accounting for more than half the core CPI increase. On an annual basis, shelter costs increased 6.2%, or about two-thirds of the rise in inflation.”

Danielle Hale of Realtor.com comments that the new inflation data shows that the decline in mortgage rates may have been premature as inflation remains above the 2% target. Mortgage rates have stabilized, according to Hale, but could increase further due to today’s inflation report. Shelter costs have risen by 6.2% over the last year, contributing to more than half of the price increase. The rental market is weak and expected to remain so until more supply comes online.

Fan Yu-Kuo of the National Association of Home Builders (NAHB) reports that inflation is moderating from 6.5% in 2022 to 3.4% by the end of 2023. That said, shelter costs continue to put upward pressure on overall inflation, showing the need for additional housing supply. Shelter currently makes up a total of 40% of core inflation. 

Source: NAHB (January 2024)

NAR

Amidst ongoing commission lawsuits in various states, the National Association of Realtors (NAR) reports that its President, Tracy Kasper, has resigned after only four months into the job. In its release, NAR states that:

“NAR President Tracy Kasper informed NAR’s Leadership Team that she recently received a threat to disclose a past personal, non-financial matter unless she compromised her position at NAR. She refused to do so and instead reported the threat to law enforcement. Ms. Kasper felt that, in the circumstances, it was best for the organization that she step down.”

Debra Kamin of the New York Times (NYT) comments on the resignation, highlighting that it comes amidst the legal cases where NAR and other brokerages were found guilty of conspiring to enforce a policy that required home sellers to pay commissions to the agent representing the buyer. A federal court recently ruled in favor of three plaintiffs, who claimed they paid excessive fees and ordered NAR and the brokerages to pay almost $1.8 billion, which could rise to more than $5 billion with treble damages. 

The Real Deal also reports that NAR and other firms are challenging this recent Sitzer/Burnett verdict. NAR, alongside HomeServices of America and Keller Williams, have filed separate motions to undo the ruling in the case involving broker commissions. They claim that a new trial is warranted by legal errors, excessive damage award, and impropriety by plaintiffs’ counsel. 

The lawsuits aren’t just aimed at NAR, with Brooklee Han of HousingWire reporting that “a copycat suit filed last Friday in U.S. District Court in Arizona, Joseph Masiello, an Arizona resident and home seller, accuses several real estate companies of colluding to artificially inflate real estate agent commissions,” including Homesmart, among others.